Indonesia released new regulations for on-demand motorcycles, but without agreement on tariffs

After a long back and forth, the regulation is out.

After a long back and forth, Indonesia’s transportation regulatory body on Tuesday finally released a new set of regulations that aims to improve the livelihoods of the local motorcycle taxi drivers linked up in ride-hailing platforms like Go-jek and Grab.

One important piece, however, is still missing: A minimum tariff for rides, which has been demanded by driver communities through strikes and protests throughout last year.

The new Minister of Transportation Regulation No.12 / 2019 covers aspects from passenger safety, standards of service, and the nature of the partnership between drivers and ride-hailing operators, among other things.

An example for a service standard is the obligation to use a reflector on the driver’s jacket to increase visibility at night, and the use of technology to record location, direction, and speed of the bike to reduce accident risk.

Regarding safety, the applications are required to have panic buttons for drivers and passengers. Just a few days ago, Go-Jek launched its latest security features consisting of share ride and an emergency button on its platform to help prevent and combat crime. Grab had introduced similar features last year.

The regulation also requires ride-hailing companies to make transparent its procedures regarding driver suspension transparent, including explanations about the criteria and levels of sanctions before suspension or termination of the partnership. It also gives drivers some rights to objection and clarification so that the companies cannot terminate cooperation unilaterally. In addition, the new rules also require ride-hailing apps to offer their “driver partners” social security and health insurance.

The Ministry hopes that the issuance of this regulation can accommodate a number of problems in the field relating to online motorcycle taxis.

The Ministry’s director of land transportation, Budi Setiyadi, told several local media outlets that the upper and lower tariff caps will be introduced in a separate decree.

Additionally, the regulation also includes a classification of the types of motorbikes eligible for use in these networks. This point might affect the fate of bike-sharing platform Migo whose electric bikes don’t yet fall under a clear vehicle classification.

The issue of tariffs is still being finalised because there’s no agreement yet between the government, the ride-hailing companies, and drivers. But the tariff will be evaluated every three months, Setiyadi said.

The current tariff calculation formula factors in direct and indirect costs, such as vehicle depreciation costs; fuel costs; maintenance and repair costs; taxes, and mobile phone depreciation fees and serves as a guideline for how ride-hailing companies should determine tariffs.

Transportation Minister Budi Karya Sumadi had proposed between IDR 2,400 (US$0.17) per kilometre in a statement to local press.

In response to this, Grab advised that the ideal rate increase for a maximum ride-hailing service of IDR 2,000 per kilometer. “If the tariff increase is too significant, the impact will immediately be felt by the majority of consumers from the middle class with limited transportation budgets who will find it difficult to adapt and will switch to more affordable transportation modes,” said Grab Indonesia’s head of public affairs, Tri Sukma Anreianno.

According to Anreianno, around 71% of consumers only tolerate a spending increase of less than IDR 5,000 (US$0.35). Based on that calculation, with each of Grab’s users in Indonesia tallying an average of 8.8 kilometres from their rides every day, the ideal increase in rates is a maximum of IDR 600 (US$0.042) per kilometre which translates to a minimum tariff of IDR 2,000 (US$ 0.14)/kilometre.

This figure is different from the demands of most drivers who want a minimum tariff of IDR 3,000 (US$ 0.21) per kilometre.

The Minister of Transportation said he was looking for the best solution for this issue, and make a decision next week.

“We hope that the Minister of Transportation’s decision about tariff regulation will be formulated wisely to maintain a sustainable source of livelihood for the driver’s partners, while also maintaining service quality, driving comfort and consumer safety at the same time,” Anreianno concluded.

 

Editor: Nadine Freischlad